Valutico

FEBRUARY 27, 2024

Capital Asset Pricing Model (CAPM): According to CAPM, the expected return on a stock has two main components: the risk-free rate and a risk premium. The risk-free rate represents the return an investor can get without taking on any risk, typically derived from government bonds.

Discounted Cash Flow 52

Discounted Cash Flow Risk Premium Risk-free Rate Beta 52

Equidam

APRIL 26, 2025

This incorporates the risk-free rate, a market risk premium specific to the company’s country, and Beta ($beta$). Beta measures the volatility of the company relative to the market. We calculate the cost of equity using the Capital Asset Pricing Model (CAPM).

Discounted Cash Flow 59

Discounted Cash Flow Terminal Value Book Value Beta 59

Andrew Stolz

AUGUST 6, 2020

The return on assets is determined by systematic factors such as changes in inflation , risk premiums, interest rates, etc. Investors construct portfolios with unsystematic risks, which are well-diversified to reduce total portfolio risk. In theory, arbitrage provides investors with a high chance of success. 1 + RP1 + ??2+

Risk-free Rate 52

Risk-free Rate Risk Premium Beta Marketability 52

Musings on Markets

JANUARY 5, 2024

Beta & Risk 1. Equity Risk Premiums 2. I also have implied equity risk premiums (forward-looking and dynamic estimate of what investors are pricing stocks to earn in the future) for the S&P 500 going back annually to 1960 and monthly to 2008, and equity risk premiums for countries.

Dividends 107

Dividends Risk Premium Equity Book Value 107

Musings on Markets

FEBRUARY 10, 2021

I know that many of you are not fans of modern portfolio theory or betas, but ultimately, there is no way around the requirement that you need to measure how risky a business, relative to other businesses. (More on that issue in a future data update post.) But what if the company is looking at a project in Nigeria or Bangladesh?

Risk-free Rate 52

Risk-free Rate Risk Premium Start-ups Equity 52

Appraisal Rights

JUNE 5, 2017

In selecting the appropriate equity risk premium, the court observed that whether to use supply-side or historical ERP should be determined on a case-by-case basis. With regard to beta, the court found fault with both side’s approach.

Beta 40

Beta Risk Premium Capital Structure Discounted Cash Flow 40

Andrew Stolz

MARCH 20, 2020

The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility. The market risk premium is calculated from a market rate of return less a risk-free rate. Therefore, the risks of the firm are eventually increased. Conclusion.

Beta 52

Beta Capital Structure Risk-free Rate Weighted Average Cost of Capital 52

Equilest

APRIL 11, 2023

With limited features and formulas, it can be difficult to account for all the necessary parameters in a valuation, such as interest rates, equity risk premiums, and beta. It lacks interest rates, equity risk premiums, beta, and other important data.

Business Valuation 40

Business Valuation Beta Risk Premium Discounted Cash Flow 40

Musings on Markets

JANUARY 6, 2023

When valuing or analyzing a company, I find myself looking for and using macro data (risk premiums, default spreads, tax rates) and industry-level data on profitability, risk and leverage. I do report on a few market-wide data items especially on risk premiums for both equity and debt. Cost of Equity 1.

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Brian DeChesare

MAY 3, 2023

Dividend Discount Model, Part 4: Present Value of Terminal Value and Dividends Since the Dividend Discount Model is based on Equity Value, not Enterprise Value, the Discount Rate is the Cost of Equity: Risk-Free Rate + Equity Risk Premium * Levered Beta.

Dividends 64

Dividends Terminal Value Enterprise Value Equity 64

Equilest

APRIL 12, 2023

This will enable you to get an economic analysis of your industry, as well as the earning multiple, sales multiple, beta, and risk premium, all automatically from the Equitest database.

Business Valuation 40

Business Valuation Beta Risk Premium Marketability 40

Valutico

AUGUST 10, 2023

It needs to incorporate both the project risk and the opportunity cost, typically done using the CAPM method. However, market information required for CAPM, such as beta coefficients and risk premiums, may not be available for SMEs.

Discounted Cash Flow 52

Discounted Cash Flow Asset-based Approach Intangible Assets Business Valuation 52

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 83

Equity Book Value Start-ups Corporate Finance 83

Valutico

SEPTEMBER 13, 2023

It needs to incorporate both the project risk and the opportunity cost, typically done using the CAPM method. However, market information required for CAPM, such as beta coefficients and risk premiums, may not be available for SMEs.

Discounted Cash Flow 52

Discounted Cash Flow Comparable Company Analysis Asset-based Approach Intangible Assets 52

Valutico

OCTOBER 20, 2022

Rf = Risk-free Rate. B = Beta. (Rm Rm – Rf) = Equity Market Risk Premium. Cp = Cost of Equity Premium. DCF WACC—similar to the above except that it calculates a different WACC in each forecast period based on a changing capital structure (D/E) and thus a changing beta in each period. Cost of Debt.

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

Musings on Markets

JANUARY 12, 2021

Thus, you and I can disagree about whether beta is a good measure of risk, but not on the principle that no matter what definition of risk you ultimately choose, riskier investments need higher hurdles than safer investments.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Equilest

JUNE 10, 2023

Factors such as multiples, beta, and equity risk premium are required for accurate calculations. Determining which method to use depends on factors such as the business's size, growth potential, industry conditions, and available data.

Business Valuation 40

Business Valuation Fair Market Value Marketability Technology 40

Musings on Markets

JULY 22, 2021

Raising or lowering the cost of capital has an effect on value, but changing my assumptions about risk premiums, betas or debt ratios has a much smaller effect that changing assumptions that alter cash flows.

Marketability 99

Marketability Start-ups Equity Price to Book 99

Equilest

JUNE 13, 2023

Factors such as multiples, beta, and equity risk premium are required for accurate calculations. Determining which method to use depends on factors such as the business's size, growth potential, industry conditions, and available data.

Business Valuation 40

Business Valuation Asset-based Approach Appraisal Intangible Assets 40

Appraiser Newsroom

JUNE 4, 2024

He is member of the Beta Gamma Sigma Honor Society, Financial Executives International, and the National Association of Corporate Directors (NACD). Dr. Everett also has an M&A Advisory and business valuation practice. Michael is part of the industrial products industry group of the firm and co-head of U.S.

Business Valuation 59

Business Valuation Intangible Assets Appraisal Finance 59

Musings on Markets

JANUARY 28, 2024

In short, if you don't like betas and have disdain for modern portfolio theory, your choice should not be to abandon risk measurement all together, but to come up with an alternative risk measure that is more in sync with your view of the world.

Risk Premium 122

Risk Premium Beta Start-ups Equity 122

Musings on Markets

FEBRUARY 16, 2024

Intrinsic Value Effect : The calculations for cashflows are identical to those done when the risks are company-specific, with cash flows estimated with and without the catastrophic risk, but since these risks are sector-wide or market-wide, there will also be an effect on discount rates. at the end of 2007 to 0.85

Risk Premium 78

Risk Premium Start-ups Beta Marketability 78

Musings on Markets

FEBRUARY 27, 2023

An Optimizing Tool In my second and third data posts for this year, I chronicled the effects of rising interest rates and risk premiums on costs of equity and capital. In computing the latter, I used the current debt ratios for firms, but made no attempt to evaluate whether these mixes were "right" or not.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Equidam

MAY 14, 2025

This calibration directly impacts expected returns, required ROI, survival rates, and appropriate liquidity discounts, significantly refining risk assessment. Country: Argentina Operating from Argentina influences extrinsic risk factors due to regional economic conditions, market size, regulatory environment, and currency stability.

Risk Premium 64

Risk Premium Risk-free Rate Beta Market Risk 64

Equidam

APRIL 22, 2025

10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23] 23] Risk-Free Rate: Tied to government bond yields (e.g.,

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64